By Adela Suliman and Atul Prakash
LONDON (Reuters) - Britain's top equity index rose on Thursday, led higher by a jump in Morrisons (L:MRW) after a rise in its first-half profit for the first time in four years, but Next (L:NXT) slumped following poor results.
The blue-chip FTSE 100 index (FTSE) closed slightly higher for the second session in a row, up 0.9 percent at 6,730.30 points though still near a one-month low after a shaky start to the week.
Supermarket operator Morrisons was the top performer, rising 7.5 percent and touching its highest level since March 2015 after reporting a rise in first-half profit for the first time in four years and a third straight quarter of underlying sales growth.
Nicholas Hyett, analyst at Hargreaves Lansdown (LON:HRGV), said the firm was not completely out of the woods.
"Lower sterling will increase the costs of imported foods, and how far the supermarket is able to pass that increase on to customers remains to be seen," he said.
Sector rivals Tesco (L:TSCO) and Sainsbury (L:SBRY) were also among the top performers, up 4.9 percent and 2.1 percent respectively.
British clothing retailer Next (L:NXT) dropped nearly 5 percent after it reported a 1.5 percent fall in first-half profit and said trading since July had been challenging and volatile.
Next's results also put pressure on peer Marks & Spencer (L:MKS), which fell 2.6 percent.
"Even though Next is less prone to the difficulties currently facing the high-end retailers, there are a number of struggles ... which the company is confronting with varying degrees of success," said Richard Hunter, head of research at Wilson King Investment Management.
"The retail business has seen a slump in operating profit, the group overall has suffered due to the increase in markdown sales and the outlook is notably cautious. The wider implications of Brexit, such as higher import costs, have yet to wash through, whilst competition in the sector remains intense."
Official figures showed that British retail sales softened only slightly in August after a bumper July, suggesting June's vote to leave the EU has had little initial impact on shoppers' willingness to spend.
The FTSE 100 was steady after the Bank of England said it was likely to cut interest rates later this year to just above zero, despite resilient data and economists expecting Britain to dodge a mild recession after Britain's June referendum.
Coca-Cola HBC (L:CCH) rallied, its shares hitting their highest level since January 2014 on an upgrade from Credit Suisse (SIX:CSGN) to "outperform" from "neutral".
Credit Suisse raised Coca-Cola HBC's target price, stating better prospects in its main markets in Russia and Nigeria.
"CCH is our preferred European bottler given its more attractive topline and EBIT growth potential, better ROIC momentum and scope for balance sheet action over the next 12m," analysts at Credit Suisse said in a note.
Outside of the large caps, specialist annuities provider JRP Group (L:JRP) was up more than 18 percent. It posted a 12 percent rise in operating profit on a pro-forma basis in the first half, boosted by the integration of a former rival.